stevespray
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I think that it will also be worth looking at the statistics of Dow touching +30 pre open and therefore we will be able to consider the real truth behind the 'gap close' trade. I cant remember any stats regarding the gap close on Dow but I remember some time back reading that closing gap trades could be quite profitable and also had quite a remarkable hit rate. One would obviously imagine that the bigger the gap then the less chance of it closing but do the statistics support that theory in a uniform manner? If they dont then an anomaly does perhaps exist.
On the subject of the '+30 bet' itself - surely the +30 has to occur pretty early for the odds to be beneficial to the trader. As someone already mentioned, if it happens too late then any potential value is lost as it is far less likely that someone will misprice the remaining time premium.
I would also say, that for backtest purposes, volatility has to be taken into consideration. There have clearly been days over the last few years where the Dow could move 30 points in 5 seconds and on other days it hasn't moved 30 in 5 hours.
Steve.
On the subject of the '+30 bet' itself - surely the +30 has to occur pretty early for the odds to be beneficial to the trader. As someone already mentioned, if it happens too late then any potential value is lost as it is far less likely that someone will misprice the remaining time premium.
I would also say, that for backtest purposes, volatility has to be taken into consideration. There have clearly been days over the last few years where the Dow could move 30 points in 5 seconds and on other days it hasn't moved 30 in 5 hours.
Steve.
